The valuation of older “new homes”.
Estate agents – they only act in their own best interests
Estate agents proudly state that a home was sold in 12 days, with the implication that the agent is good – more likely he was just plain lucky. It is even more likely, in fact a virtual certainty, that the home was severely undervalued by the agent in the first place. Sold too cheaply. You don’t need an estate agent to sell your home at a bargain price and paying upwards of £7,000 commission to the agent is adding insult to financial injury.
Whilst it is well known that most buyers take what they are told by estate agents with a pinch of salt, the same cannot be said of those selling their homes. All too often they are far too trusting, believing that as they are paying an agent for a service, acting on their behalf, in their best interests. However the industry is like the proverbial giant squid, is always “sticking its tentacles into everything property that smells like money.” Take the Energy Performance Certificates (EPC), arranged by agents for £105 yet available online for under £40. The managers running offices in high street estate agents have monthly sales targets to meet. They need properties on their books that they can sell. Homes they can sell quickly, with a minimum of time and effort or they will lose both bonuses and commission. It matters little to an agent when an offer of £20,000 less than the “asking price” is made. He loses around £300 (at 1.5%) but the vendor loses £20,000!
The great sellers’ rip-off begins with the valuation visit. They invite the agent into their home for a valuation, trusting that the agent is the professional and will advertise their home for the maximum achievable in the market. The agent will already know what “price” he will tell you to market your home for before he even gets in his car! This will be based on the most recent sales and homes currently on the market in the area. It will have little to do with the location, condition and features of your particular property. If a four-bedroom home on an estate was priced at £335,000 and sold for £320,000, then this is what he will suggest you market your four-bedroom home for and the price you can expect to get. This irrespective of the desirability of your home and whether it is double fronted and has additional rooms.
The highest paid 1% receives around 8% of the national income. The wealthiest 1% owns 23% of the national wealth. It is in property where greatest inequalities lie, not income.
Most people are in favour of higher wages and benefits for the poor, higher taxes on the rich 1% and the provision of food, clothing, shelter and health care for all. Who are against this? The rich. Even though the vast majority of our population is in favour of progressive and fairer policies, the rich are better placed to influence politics. Why else do wealthy individuals give so generously to political parties? The rich have always prioritised their own self-interests above the needs of the many.
The UK residential market is a prime example. The rich have squeezed out any resemblance of affordability for the many, through ever-higher house prices and declining real term wages. Demand from private buy-to let landlords, who have the benefit of generous tax breaks that homebuyers do not, have helped force house prices ever higher at the expense of working first-time buyers.
Policies such as ‘Right to Buy’ have reduced the amount of affordable, state-owned homes for rent by people on low wages or benefits. The result, those that need to rent are being forced into the private rental sector, with higher demand from those receiving housing benefit resulting in the rich landlords increasing rents ever higher, when rents can be covered by taxpayers to the tune of up to £15,000 a year, irrespective of what is considered a ‘reasonable’ or ‘affordable’ rent.
At last people are starting to ask why do estate agents still exist. As I have said before, in a previous blog there is now no longer any need to use a high street estate agent to sell your house. Everything they used to do can be done using an online agent for less than £1,000, irrespective of the selling price in most cases. The only thing left for sellers to do is show potential buyers around their home. After all the owner will know more about the property than the estate agent, however good they say they are, ever will. If necessary, even viewings can be sub contracted out for minimal extra cost.
So why do estate agents still exist? Why exactly! It could be that older sellers are reluctant to trust the new technology or do not have confidence online. It could be vendors choose to take the easy, traditional option despite the thousands of pounds they are wasting unnecessarily. More likely it is the fact that estate agents are “like the proverbial giant squid “sticking its tentacles into everything property that smells like money.”
Buying a brand new home built to exacting standards, the latest energy-efficient designs with a ten-year warranty, where could naive, trusting new homebuyers possible go wrong? Read on to discover the twenty most common mistakes made by Britain’s new home buyers and make sure you don’t become yet another victim of the UK housebuilding industry.
1) Buying a new home because they can not because they should Various government schemes such as Help to Buy schemes make it easier and often the only financially possible way to get on the housing ladder. Being able to buy is not alone a good enough reason to buy a new home.
2) Using the housebuilder’s recommended, suggested or nominated firm of solicitors
The number one mistake made by new homebuyers. Despite it being illegal for housebuilders to insist that buyers use a certain solicitor, it still occurs. One major plc housebuilder even pre-filled in reservation forms with their preferred solicitor! By using the housebuilder’s solicitor buyers are not only relinquishing control of the process to the housebuilder, they are actually putting themselves at a legal disadvantage by not having their interests represented. Issues include; buyers legally completing on unfinished houses, a buyer of a flat later discovered specifications had been changed and the length of lease reduced and being told that completion certificates and warranty documents had been received when they had not even been issued, due to unresolved compliance and warranty problems with the home.
3) Not having their new home independently professionally snagged and inspected
The second biggest mistake new homebuyers make is not having their new home professionally snagged and inspected before they legally complete. It is a sad fact that around 96% of all new homes buyers will have defects and problems with their new homes after they have moved in. Many, if not all of these could have been prevented if the property had been properly inspected at each construction stage by both the housebuilder’s site management and warranty provider. It is therefore essential that new homebuyers use an independent professional to thoroughly snag and inspect their new home before they legally complete. This not only ensures it is, at the very least, fully completed before they pay for it, it also highlights all visible defects, snags and breaches of regulations and warranty standards. Unfortunately both the housebuilders and warranty providers cannot be relied upon to properly carry out the inspections and oversee remedial works to correct defects.
4. Not doing any research regarding housebuilders or new homes before buying
Websites such as our sister site www.brand-newhomes.co.uk and various forums have a wealth of information available for the new homebuyer. This enables them to make a fully informed choice, aware of what can and does go wrong and what steps they can take to reduce disappointment and feelings of regret and resentment after moving in.
5. Paying too much – not getting a discount
All house builders have a price list but only a fool actually pays the full price. Site sales staff nearly always have “negotiables” they can offer buyers with discounts amounting to 5-10% off the full advertised price on certain plots at certain times of the year. In addition, many new homebuyers buy at or near the top of the market paying too much only to later watch as the resale value of their home plummets just as interest rates rise and the housing market crashes.
The Stamp Duty reform announcement in George Osborne’s Autumn Statement is yet another example of UK Government’s generosity towards the house building industry. It could be argued that anyone buying a home, old or new-build will benefit, with reportedly 98% of homebuyers paying less from today. However the reform, whilst long overdue, will mean more people paying higher stamp duty in the long run with the housing market no longer constrained at the old price threshold levels and sellers free to tick up asking prices above the £125,000 zero threshold.
Many experts say the surprise change to the stamp duty system is likely to provide a fresh boost to the housing market and lead to higher prices for homes where the tax will be cut, property experts have warned. Mortgage lenders and estate agents have argued for a long time that this distorts the market, with house prices bunched just below thresholds.
There are few who could argue that stamp duty land tax is as unfair as it is unpopular and well past its ‘reform by’ date! With the current thresholds and the excessive tax incurred, it is hardly surprising that more and more people are staying put. A report in The Times highlighted that in the 1980’s, around 12% of all houses changed ownership every year. Last year the figure was just 4%.
There have long been calls for stamp duty to be made marginal, the same as income tax, so that the percentage paid relates to the amount above each particular threshold, rather than on the whole amount.
This is precisely what Scotland are introducing from April 2015 with their Land and Building Transaction Tax announced last week.
For a start no tax is due on properties sold for less than £135,000 – £10,000 higher than the rest of the UK. Then between £135001 and £250,000 a 2% tax is charged but only on the proportion above the nil-rate threshold. After that it gets a bit silly! A 10% tax is due on the proportion between £250,000 to £1 million and 12% on anything above £1million.